The disappearance of America's middle-class is generally
attributed to the "loss of manufacturing jobs," as technology
replaces people and companies move jobs overseas. (Apple, for example.)

This explanation is a smoke-screen.

Yes, a lot of the manufacturing jobs that America has lost paid
good middle-class wages. And, yes, many of the folks who lost
manufacturing jobs have not been able to find comparably
compensated other jobs.

But the real problem is the loss of good-paying jobs,
not the loss of manufacturing jobs.

Many Americans who used to have middle-class manufacturing
jobs—or who would have had them had they not disappeared—now work
in low-wage service jobs at companies like Walmart, McDonald's, and Starbucks.

The consensus about these low-wage service jobs is that they're
low-wage because they're low-skilled.

But that's not actually true. They're low-wage because companies
choose to make them low-wage.

No, you say. Low-wage service jobs are low-wage because
they're low-skilled. It's a free market. Companies should pay
their employees whatever the market will bear. If those
low-skilled, low-wage workers had any gumption, they'd go get
themselves skilled and then then they'd be able to get
high-paying, high-skill jobs. Employers shouldn't have to pay
employees one cent more than the market will bear.

This argument overlooks three things:

First, all those good-paying manufacturing jobs that
the U.S. has lost weren't always good-paying. In fact,
before unions, minimum-wage laws, and some enlightened thinking
from business owners (see below), they often paid
terribly.

Second, the manufacturing jobs also weren't high- or
even medium-skilled. In fact, most of these
manufacturing jobs required no more inherent skill than the
skills required to be a cashier at Walmart, a fry cook at
McDonald's, or a barista at Starbucks. (Yes, people who work on
assembly lines building complex products need training.
But cashiers, fry cooks, and baristas need training, too. Don't
believe this? Go volunteer to be a Walmart cashier or a
Starbucks barista for a day. )

Third, it is often in companies' interest—as well as
the economy's interest—to pay employees more than the market
will bear. For one thing, you tend to get better
employees. For two, they tend to be more loyal and dedicated.
For three, they have more money to spend, some of which might
be spent on your products.

A century or two ago, many of the manufacturing jobs in the
economy paid extremely low wages, and the work was done in
dangerous,
unhealthy environments. Then workers began negotiating
collectively, and wages and working conditions improved.

Corporate profits as a percent of GDP are near an
all-time high..St. Louis
Fed

Importantly, some companies also realized that paying their
workers more would actually help their own sales, because their
workers would be able to buy their products. Henry Ford famously decided to pay his workers well
enough that they could afford to buy his cars. This was not just
altruistic. It helped Ford sell more cars. But it also helped
America build a robust middle-class and middle-class
manufacturing jobs.

Struggling companies don't have the option of paying their
workers more, because they operate on razor-thin margins. But
this is not the case for Walmart, McDonalds, Starbucks, and other
robustly healthy companies that employ millions of Americans in
low-wage service jobs.

Corporate profit margins, in fact, are close to an all-time high,
while wages as a percent of the economy are at an all-time low.

So companies have plenty of room to pay their employees more, if
only they choose to do so.

The average Walmart associate makes about $12 an
hour--below the poverty line.AP

There is a lot to support the argument that, if these companies
paid their employees more it would not just help the employees
and the economy but the companies' customers and shareholders, as
well. But we'll leave that discussion for another day.

For now, we'll just ask a simple question of three
companies—Walmart, McDonald's, and Starbucks.

How do you feel about paying your employees so little
that most of them are poor?

These employees are dedicating their lives to your companies.
They're working full time in jobs that are often physically and
mentally demanding (again, if you don't think so,
try being a barista). And you pay many of the employees so
little that they're poor.

Walmart, McDonald's, and Starbucks employ about 3 million people
(not all Americans). They also collectively generate about $35
billion of operating profit per year. If the companies took, say,
half of that operating profit and paid their employees an extra
$5,000 apiece, it would make a big difference to the employees
and the economy. The companies would still make boatloads of
money, and the employees' compensation would finally be above the
poverty line.

Yes, we know, of course you wouldn't do this out of the goodness
of your hearts. Again, we'll save a full discussion of the
benefits of this decision for another day, but here are a few to
think about:

If you paid your employees more, they would have more money to
spend on your products, which could modestly boost your growth
and profits. You would probably also have better employees: You
could be choosier in hiring, and your employees would probably
work for you for longer and be more dedicated. And with better,
more dedicated employees, your productivity and customer-service
would probably go up, which would create value for your
shareholders—long-term brand value, not just short-term profit
dollars.

So, again, how do you feel about paying your employees so little
that most of them are poor?